IanSherr

Sony Corp. (6758.TO) is planning to unveil its next-generation home videogame console during a February event, showing off a successor to its current PlayStation 3 system.

The Japanese electronics giant Thursday unveiled plans for a special PlayStation-themed event set for Feb. 20, teasing fans to "see the future" at the event. People familiar with the matter have said the new device will make its debut there, beating Microsoft Corp. to the punch in announcing its own next-generation game machine.

Sony's device will be released later this year, these people said, and will spar against Microsoft's own machine, which is also expected to be released by the holidays.

Sony's updated console's arrival comes as the console videogame industry has entered a tailspin. Sales of new videogames, consoles and accessories at U.S. retail shops fell 22% in December when compared with the same time a year prior, according to surveys by industry watcher NPD Group.

In another sign of the difficult environment for traditional videogame machines, Nintendo Co. slashed sales forecasts for its new home console, the Wii U, earlier this week. After launching its first new home console in six years in November, Nintendo said Wii U sales disappointed during the holiday shopping season. The company is now forecasting plans to sell 4 million units versus an earlier estimate for 5.5 million units.

The next wave of videogame machines is coming to market at a time when the industry is undergoing a sea change. While videogames used to be limited to dedicated game machines and personal computers, the proliferation of smartphones and other Internet connected devices is opening the floodgates to free or inexpensive games.

Such shifts in consumer behavior and the ageing consoles - the Xbox 360 debuted in 2005 and the PS3 a year later - are weighing on game sales, which have contracted every month since December of 2011. Further, Electronic Arts Inc. said the console industry's packaged goods sales have fallen about a fifth so far this fiscal year.

In a nod to the changes afoot in the industry, Sony is planning to incorporate more social gaming aspects into the new machine, people familiar with the matter said. Also, while hardware improvements were a key focus of past console upgrades, Sony is more focused this time on the changes in how users interact with the machine, these people said.

When developing the PlayStation, Sony had considered removing its optical disk drive, opting instead to require gamers to download titles over the Internet, people familiar with the matter said. But concerns over the size of videogame files, and slow web connections in some countries led Sony to scrap the plan, they added. Microsoft made a similar decision for its console as well.

Complicating the design of the new device will be the likely inclusion of chips designed by Advanced Micro Devices Inc., which people familiar with the matter said have been used in prototypes. The chip is separate from the technology Sony currently relies upon for its PlayStation 3, known as the Cell chip, which was developed jointly with International Business Machines Corp. and Toshiba Corp. The move would both introduce compatibility concerns with existing games, built to run on the Cell chip, while also ending a long-running partnership with Nvidia Corp., which supplies graphics chips for the current PlayStation.

In Sony's efforts to beef up its videogame offerings, it purchased Gaikai Inc. for $380 million last year. The company lets gamers play visually sophisticated games through a Web browser, without the need for specialized hardware or graphics circuits. Gaikai's technology runs games run in a data center and then streamed the images over the Internet.

The PlayStation 3 was a technological marvel when it was released in November 2006. While it has sold more than 70 million units since its debut, the PS3 didn't dominate the industry in the way that its predecessors did. Initially, the machines gave consumers sticker shock, launching two models at $500 and $600. Even at that price, the console was selling at a loss, forcing the company to incur massive losses.

Over time, Sony brought down the PS3's price and improved the machine's profit margins, but it still trails Nintendo's Wii and Microsoft's Xbox 360 in overall units shipped.

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